Update on IRS Form 11457 for Voluntary Disclosure in IRS VDP (6/30/25)

 The National Taxpayer Advocate announced that, at her urging, the IRS has agreed:

1. to eliminate the Part II (complete upon acceptance into the VDP) checkbox

2. to establish a “working group to comprehensively review the current VDP, provide recommendations for reforming the program, narrow the definition of illegal source income to encourage greater participation in the VDP, and clarify other terms.”

See Criminal VDP: TAS Reports a Win For Taxpayers – IRS Agrees to Remove Willfulness Checkbox on VDP Application Form (NTA Blog 6/24/25), here.

I revised the working draft of the Federal Tax Procedure 2025 Editions (to be published at least by early August 2025) to include this information. Perhaps the key issues I mention in the working draft are:

• As of the date of this publication, the Form available on the IRS website is dated 11/12/24 and thus does not yet implement that decision. Can a taxpayer in the meantime omit checking the box in the currently available Form?;

• Will the IRS revise or eliminate the other instructions about willfulness in Part I and Part II (see the discussion of the willful requirement in paragraph 1 above)?; JAT editorial comment: I speculate that the IRS will try to limit submissions to those taxpayers with real prosecution risk, so may carefully word the Form to eliminate only the specific admission of willfulness; taxpayers and their counsel should consider carefully how the narrative discussions are presented;

• Relatedly, the IRS also agreed to establish a “working group to comprehensively review the current VDP, provide recommendations for reforming the program, narrow the definition of illegal source income to encourage greater participation in the VDP, and clarify other terms.” It is not clear whether the IRS will delay revising the Form until the working group’s recommendations are available.

This blog entry is cross-posted on my Federal Tax Crimes Blog, here.